From "Lack of Customers” To "Customer Value"

Today, the greatest challenge businesses face is "lack of customers." Additionally, businesses must confront competition from emerging companies across industries, often from outside their own sectors. Yet, companies that defy cycles and achieve countertrend growth share a common trait: they focus on customer value.

Customer value is both the starting point and the ultimate goal of business operations.

（ Practical AI solutions in the end ）

The Connection Between Management and Economics

The word "management" is frequently mentioned in daily operations, but its interpretation varies widely. My understanding of management is inseparable from the perspective of economics.

Years ago, I came across a line in an essay by a literary figure: "If you study economics, you will do so with tears in your eyes because it is a tragic discipline." When I first read this, I could not understand why studying economics could evoke such emotions. At the time, I dismissed it as literary exaggeration. However, as my understanding of economics deepened, I began to grasp the profound meaning of this statement.

The Sadness of Economics: Limited Resources, Infinite Demands

Gregory Mankiw, while teaching economics to Harvard freshmen, said that the goal of economics is to understand the world we live in, not to advocate for specific policies. Through Mankiw's interpretation, I realized why economics is considered tragic—it involves using limited resources to satisfy people's infinite desires, a task that is inherently unattainable.

The key difference between economics and management lies here: Management uses limited resources to create as much additional value as possible, using this value to meet people's demands.

Management Tools: Means, Not Ends

Many businesses chase the latest management tools. During my visits to various companies, I noticed that nearly all of them had used tools like strategic planning, benchmarking, corporate culture building, process reengineering, goal management, balanced scorecards, performance evaluation, Six Sigma, and OKRs—on average, each company had employed 16 different tools.

However, it is easy to forget a simple fact: Businesses are not experimental grounds for new theories or tools. They need practical outcomes, not flashy theories or tools. Tools that fail to enhance business quality or outcomes lack real value.

The essence of management is not in the pursuit of tools but in achieving tangible operational results.

The Four Basic Elements of Management

To achieve operational goals, businesses must define their foundational elements. In my view, these are:

1. Customer Value: The starting and ending point of business operations.
2. Cost: The foundation of sustainable development.
3. Scale: Leveraging scale effects to optimize resources.
4. Profit: The ultimate aim, rooted in human-centered care.

Customer Value: The First Element of Management

Peter Drucker once said: "The purpose of a business is to create customers." This indicates that the essence of management is to create customer value, the ultimate purpose of running a business.

However, preaching is one thing, while getting others to listen and act is another.

Learning from Total Quality Management (TQM)

W. Edwards Deming initially struggled to gain traction for his quality management ideas in the U.S., as American businesses at the time faced little external competition. Conversely, post-war Japan, eager for recovery, embraced his teachings.

In 1950, Deming was invited to lecture in Japan, leading to the emergence of "Japanese management." In 1985, Kaoru Ishikawa summarized Japan’s success into the model of Total Quality Management (TQM).

TQM's defining feature lies in its comprehensive approach:

1. Customer-Centric: Quality is determined by customers, not businesses.
2. Beyond Product Quality: It encompasses the quality of every individual's work.

As customers gain importance, quality management evolves to incorporate customer value, transcending mere product quality.

What Is Customer Value?

The concept of "customer value" has long been debated in management circles. While many strive to define it clearly, I have abandoned such efforts in favor of practice.

Customer value, I believe, is not a concept but a strategic mindset—a principle summarized as "customer-centricity." This mindset involves addressing questions such as:

• What are the customer’s needs and preferences?
• How can these needs and preferences be met?
• What products and services best fulfill these requirements?
• What resources are required to deliver these solutions?
• What key assets and core capabilities are necessary?

A business capable of creating customer value must operate based on a modern value chain, starting with customer needs and preferences, guiding its products, services, and investments. This approach ensures sustainable growth and market competitiveness.

The Danger of Losing Focus on Customers

Kodak, the first company to introduce digital cameras, failed to capitalize on this innovation. Instead, it prioritized competition within the film market and overlooked shifting consumer needs, leading to its downfall.

Focusing on competitors rather than customers is a common pitfall. In contrast, companies like Apple, Google, Microsoft, and Toyota succeed because they deeply integrate into people’s lives, fostering a seamless connection with customers.

Shifting the Manager’s Focus to the Customer

To achieve countertrend growth, managers must shift their focus from internal operations to customer behavior. They need to align their efforts and decisions with customer needs, breaking down the barriers between businesses and their customers.

In volatile markets, successful businesses consistently share one trait: They focus relentlessly on their customers.

Practical AI Solutions to Enhance Customer Value and Drive Business Growth

1. AI-Driven Dynamic Customer Value Analysis

Theory: Traditional customer segmentation is static and often fails to capture real-time changes in customer needs. By integrating AI, businesses can adopt a dynamic approach to customer value analysis.

Solution:

• Use AI and machine learning models to create Customer Lifetime Value (CLV) predictions. These models consider not only historical purchase data but also behavioral patterns, engagement trends, and external factors like market conditions.
• Implement Natural Language Processing (NLP) to analyze unstructured customer feedback (e.g., reviews, social media comments) to identify emerging trends and pain points.

Application Example:

• A retail company could use AI to dynamically adjust promotions for individual customers based on real-time shopping behavior, increasing both relevance and conversion rates. Impact: By constantly analyzing and updating customer value insights, businesses can adapt their offerings and strategies to meet evolving demands, ensuring higher customer retention and satisfaction.

2. AI-Powered Operational Cost Optimization for Competitive Pricing

Theory: Competitive pricing is critical to maintaining customer value. AI can optimize resource utilization and reduce waste to enable lower costs while preserving quality.

Solution:

• Deploy AI-driven predictive analytics to forecast inventory needs, preventing overstocking or understocking.
• Use AI scheduling algorithms for workforce management, optimizing staff allocation during peak and off-peak periods.
• Implement computer vision and IoT sensors in manufacturing to monitor real-time production performance, identify bottlenecks, and reduce waste.

Application Example:

• A logistics company could use AI to optimize delivery routes, saving on fuel costs and ensuring faster delivery, which improves both cost efficiency and customer satisfaction. Impact: These measures ensure that businesses maintain a balance between cost, scale, and quality, delivering products at competitive prices without compromising on customer value.

3. AI-Enhanced Total Quality Management (TQM) for Customer Value Alignment

Theory: Traditional TQM focuses on product quality and operational processes, but AI can elevate it to include customer value alignment as an integral component.

Solution:

• Use AI-powered anomaly detection to identify defects in production or inconsistencies in service quality, ensuring products meet customer expectations.
• Implement voice sentiment analysis through NLP to assess customer service interactions in real time and make adjustments to improve satisfaction.
• Deploy AI-driven simulations to test new product designs or service models for potential issues before market launch, ensuring they align with customer needs.

Application Example:

• An automotive company could use AI to predict and preempt potential maintenance issues in vehicles, providing proactive solutions to customers and ensuring long-term loyalty. Impact: AI enhances quality management by focusing not just on minimizing errors but also on aligning every process with customer expectations, resulting in superior customer experiences.

Final Thoughts: Focusing on Customer Value Drives Growth

Countertrend growth requires:

• Clear objectives and direction.
• A customer-oriented approach to resource allocation and operational systems.
• Breaking the boundaries between businesses and customers to co-create value.

By focusing on customer value, businesses can achieve sustainable success and market leadership.